{"id":11843,"date":"2026-06-12T17:53:19","date_gmt":"2026-06-12T17:53:19","guid":{"rendered":"https:\/\/www.rbc.com\/en\/economics\/?p=11843"},"modified":"2026-06-16T15:24:56","modified_gmt":"2026-06-16T15:24:56","slug":"leadership-change-at-the-fed-wont-help-consumer-pain","status":"publish","type":"post","link":"https:\/\/www.rbc.com\/en\/economics\/us-week-ahead\/leadership-change-at-the-fed-wont-help-consumer-pain\/","title":{"rendered":"Leadership change at the Fed won\u2019t help consumer pain"},"content":{"rendered":"\n
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Next week the focus will be on retail sales data as energy prices continue to weigh on consumers. A lackluster report could overshadow the June 17 FOMC meeting, in which we expect no changes to interest rates.<\/strong> However, the bigger event will be the change in leadership as Kevin Warsh takes the reigns at his first meeting as chairman. His first notable change will likely be new language to the Fed\u2019s statement.<\/p>\n<\/div><\/div>\n<\/div>\n<\/div>\n\n\n\n

The April meeting saw the highest number of dissents since 1992, with most reflective of a pivot language towards two-sided risk. And that\u2019s what current data suggests following a reacceleration in inflation data for May alongside a sizeable upside to nonfarm payrolls and stable unemployment rate. We continue to expect the Fed will remain on hold for the remainder of 2026.<\/a><\/strong><\/p>\n\n\n\n

Indeed, the consumer will be top of mind, as we expect the May retail sales report will highlight a theme that we emphasized previously: in the face of higher inflation, consumers maintain spending at the expense of saving. Nominal retail spending is expected to look strong for a third consecutive month in May \u2013 we forecast headline retail sales will rise +0.6% m\/m. Even stripping out the impact of autos and gasoline sales, we forecast retail sales rose +0.3% m\/m.<\/strong><\/p>\n\n\n\n

Even stripping out the impact of autos and gasoline sales, we forecast retail sales rose +0.3%. <\/strong>While that sounds robust, in reality, it is in-line with the pace of headline inflation, meaning REAL retail sales will register flat. The consumer is losing steam \u2013 real wage growth is negative, the saving rate is falling, and revolving credit is on the rise after pulling back slightly in February.<\/p>\n\n\n\n

We wrote earlier that the US economy can absorb the energy shock<\/a>, and that we do not expect the spike in gasoline prices to lead to demand destruction<\/a>. The personal savings rate has fallen by a full percentage point (from 3.6% to 2.6%) between February and April. We also estimate higher tax refunds are acting as a meaningful counterweight in absorbing higher gas prices, for now.<\/p>\n\n\n\n

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Aside from retail sales and the Fed meeting, here\u2019s what else we\u2019re watching next week:<\/p>\n\n\n\n